2024 will be another year of significant transformation for the automotive retail environment. Shifting product mixes, evolving consumer demands and emerging ways to leverage data are all factors dealers need to keep in mind as they plan for the year ahead.
While there are certainly ongoing challenges ahead, dealers who proactively identify areas of opportunity to adapt will succeed and stay ahead of the competition.
Data Continues to Play a Significant Role
Understanding data and how to implement it into dealership marketing campaigns will remain essential – and a successful strategy always begins with first-party data. Dealers need to understand the insights they can access, like purchase and maintenance history, as well as customer interactions on their website.
When combined with third-party data like household demographics and financial information, a clearer picture of available opportunities emerges, enabling proactive decision-making and personalized customer interactions. Employing this approach allows dealers to identify potential customers earlier in their buying journey, avoid investing resources in leads that may not yield significant returns and ultimately set themselves up for success in the long-term.
While a data-driven marketing campaign alone won’t lead to immediate success, it’s an essential foundation. Dealers should leverage their findings alongside a continued awareness of the factors and conditions influencing the industry to ensure their efforts can be employed efficiently and tactically.
Fluctuating Inventory and Pricing Trends Change Consumer Behavior
Inventory and pricing are two of the most important trends to track and can significantly inform dealers’ marketing and sales direction.
According to S&P Global Mobility projections, U.S. sales volumes are expected to reach 15.9 million units in 2024, representing a modest increase and reflecting the cautious optimism in the industry. As inventory is increasing, vehicle prices are coming down, with vehicles actively listing an advertised price below MSRP, rising from 19% in July 2022 to 35% in December 2023 and impacting how dealers market and sell certain vehicles.
While inventory levels are improving, dealers now face the challenge of adapting to diverse product mixes. Regardless of what brand(s) they sell – when vehicles sit on the lot, their value depreciates, taking a toll on every dealership’s bottom line. Predictive marketing can help dealerships proactively manage aging inventory by finding prospective customers in their CRM and DMS who are likely to be interested in these vehicles to expedite the sales process and increase inventory turn rate.
Carefully tracking trends related to inventory and pricing empowers dealers to hone their marketing efforts and adapt them as needed to market and sell the right vehicles at the right time – especially those that are electric.
Embracing Electric Vehicles
Speaking of electric…the continued growth in battery electric vehicle (BEV) sales will continue to shake things up. In 2023, BEV sales topped 1.1 million units for the first time and made up 7.2% of all new light vehicles sold – and this number will only rise.
With S&P Global Mobility predicting that by 2030 more than 25% of new passenger vehicles sold will be electric, dealers must plan now to avoid being left behind. Dealers should account for significant investments to their lot, showroom and service bays, including adding charging stations to cater to potential EV customers.
In 2024, ensuring dealer teams are trained, educated and equipped to sell EVs should be a top priority. This includes having visibility into not only which current customers and new buyers are in market, but which customers have a higher propensity to buy an EV. Pairing those insights with personalized messaging is a win-win. This approach will help dealers establish credibility with potential buyers, which, when paired with the right tools and technology, can accelerate return on investment, maintain pace with the rest of the industry and help them remain ahead of the competition.
New Opportunities Around Leasing and OEM Incentives
Leasing struggled during the pandemic years, with new vehicle leases falling to as low as 17%. While leasing rebounded to 20.3% for CYTD 2023 through September, it still has a long way to recover.
Yet, leasing still presents dealers with a lot of opportunities, especially around customer loyalty. Customers leasing a vehicle tend to be more loyal to their dealers, making it even more important for dealers to stay in touch to keep them from defecting to another brand.
Dealers should also pay attention to how high interest rates impact consumer buying behaviors and their sales strategy. More consumers are considering financing new vehicle purchases for longer terms – with loans of 84 months growing from 5.4% of retail loans in 2021 to 10.4% in 2023, according to S&P Global Mobility and TransUnion AutoCreditInsight analysis.
This trend means dealers need to explore opportunities to retain lease customers. Dealers should consider programs that promote customer loyalty and personalized communication for lease customers preparing to return to the market.
To succeed in the evolving automotive retail environment, dealers must adapt to changing market conditions and refine their strategies. As the industry continues its transformation, those who embrace change and innovation will undoubtedly lead the way to a successful future.